Charting a Data-Driven Strategy

While partnering with presidents and provosts, business officers must develop a new dialogue, a new set of tools, and a new set of behaviors with data-driven outcomes.

By Bill Dillon and Margo Vanover Porter

Where once they safeguarded the efficiency and effectiveness of the financial activities within their portfolios, business officers now also assume the role of strategic adviser to their institutions, concluded the business officers at an October 2012 meeting at NACUBO headquarters in Washington, D.C.

"There have been a number of key shifts—from controllership of expenses to stewardship of assets and resources to strategic adviser," explains Richard Katz, president, Richard N. Katz & Associates, Boulder, Colorado. "In this newest role, the business officer is likely the only cabinet member who can really deconstruct the institution's financial activities in ways that can expose real opportunities for profound change and real reductions in cost. Whether that is in the area of resource and capacity utilization or in other areas, the business officer can lead from the side by revealing the cost of underused buildings, undersubscribed courses, and so forth."

The NACUBO meeting, cosponsored by Microsoft Corp., Ellucian, and Nuventive LLC, examined how today's business officers use data to make decisions. See also "Data Point the Way" in the March 2013 issue of Business Officer magazine.

Executives broadly defined data-driven decision making as the set of activities that makes it possible for a higher education institution to define strategic goals and measure and manage performance against those goals.

"It's critical to have information and data available in gauging the decisions we make in the context of the institutional mission and priorities," says Hossein Sadid, vice president for business and finance and treasurer, University of Richmond, Virginia.

"How else can we put in place a programmatic change or institute a new initiative? In the complex world in which we operate, you can't use your gut check to determine whether a decision will serve the institution appropriately."

Everyone Benefits by Better Decisions

Business officers must increasingly take responsibility for presenting an action plan connected to an outcome in a way that the broader campus can make use of it, according to Thomas Freitag, vice president for finance and administration, Montgomery County Community College, Blue Bell, Pennsylvania. He believes that when there is a means of providing actionable, meaningful data, people at all levels of the institution will make better decisions.

"Chief financial officers, known in the past for being the chief efficiency officers who worried about inflows and outflows of money, must find a way to assume a much greater role in mission fulfillment," Freitag says. "Using data-driven decision making, the modern CFO will guide the institution using data more effectively to inform decision making and introduce behavior change."

To begin to penetrate to the areas where the costs really live, business officers need to sit at the decision-making table with academics, insists Kathleen McNeely, who is now vice president of administration and chief financial officer, National Collegiate Athletic Association, and was formerly with Indiana University. Without being directive, business officers can explain the tradeoffs of various options, using data to support their positions.

"If we stray too much into academic freedom, we will fail before we start," she cautions. "Academic administration is a subject that cannot come off the table ... but we need to tread carefully."

In tackling these sensitive issues, business officers should guard against being misconstrued and categorized as the person who guards a pocket of gold, doling out funds and making decisions about where resources will be allocated, warns Natalie "Nikki" Krawitz, vice president, finance and administration, University of Missouri System, Columbia. In their expanded role, the chief business officer and appropriate academic must collaborate in decision making with the CBO saying, "Tell me what academic outcomes you want so I can help you achieve them."

Success Stories Abound

Many colleges and universities have already adopted, or are beginning to adopt, the framework, methodology, and metrics associated with data-driven decision making, although they may call it by another name—perhaps performance management, business analytics, or business intelligence.

Craig Woody, vice chancellor, business and financial affairs, University of Denver, Colorado, describes how his institution has successfully incorporated data-driven decision making into its culture: "Our business performance management [BPM] metrics are tied to each individual's performance for the year. Linking the two together is what makes it successful. People have to own the process. This concept allows individuals in all layers of the organization to be involved in organizational strategy. If both organizational and individual goals are not aligned, nothing ever changes."

Montgomery County Community College is employing data-driven decision making to influence process improvement. "At my institution, the faculty have traditionally been considered owners of the curriculum, without direct responsibility for institutional economic success," Freitag says. "As finances have become tight, the institution has looked at class schedules to identify strategies to schedule more efficiently, using data.

"Our college is currently partnered in a project with our scheduling software vendor to identify and affect scheduling efficiencies by eliminating low-enrollment courses and improve student access to required courses for completion. This is an example of a data-driven decision process, led by the provost and vice president of IT with buy-in by faculty. This is a powerful example how faculty and administrators can get on the same page to effect process improvement and financial outcomes."

Roadblocks Standing in the Way

While the path to data-driven institutional success inevitably leads to improved decision making, colleges and universities must surmount numerous obstacles along the way, conclude business officers. Some of the roadblocks to expect include:

Fear. When supervisors and department heads start talking about metrics and stretch goals, subordinates may become intimidated because they believe there will be repercussions for not meeting goals. Katz cites the example of a West Coast university that after experiencing a hue and cry for accountability in the mid '80s met tremendous resistance, fear, and cultural barriers until the initiative was reframed as continuous improvement.

"Unless they understand that the process is improvement-oriented, not punishment-oriented, people will resist," Katz explains. "Why would someone 'fess up to what they are doing if they know they will get their hands slapped? That's not irrational behavior. Are there only negative consequences for performance management when holding people accountable, or do we have in higher ed incentives for good behavior, whether for individuals or departments? In periods of widespread change as we see today, the premium must be on agility. Agility, in turn, demands experimentation, and experimentation assumes a tolerance for risk taking. Organizations with only negative consequences cannot be agile."

Natalie Kellner, director of administrative data managemenr, New Mexico State University, Las Cruces, also believes incentives hold more promise than punishment. "Those institutions that use information to more strategically invest in programs and incent faculty, departments, and colleges will be successful," she says.

Not walking the talk. Before they can project the framework for data-driven institutional success across the entire institution, business officers must ensure that they are taking advantage of its many benefits in their immediate sphere of influence. "We need to have an institutionwide vision, but we need to model those behaviors within our domains of responsibility to have credibility and influence those outside to take a look," says Nikki Krawitz.

She recounts an effort several years ago to institute performance metrics that met with resistance from a risk insurance manager who viewed his job as purchasing coverage for the institution. She persisted, saying, "I want to see a change. You can influence the kinds of services you offer campuses and the results and savings you help them achieve."

Now, three years later, the system has been able to reduce its workers' compensation costs because of efforts by the insurance manager to bring in educational programs. "We are in a precarious position," Krawitz says, "if we don't have our own house in order. If we don't use metrics on the activities we control, what hubris to tell the academic side of the house what they should be doing."

Changes in leadership. Data-driven institutional success can stumble when encountering leadership transitions, particularly when both board members and a new president take office. Each may want to make a mark by implementing a new process, a new metric, or a new plan, often throwing out the work already put in place.

"An ever-changing leadership allows academicians to ignore accountability," Krawitz says. "They know if they wait long enough, the plan will change because the new people want to put their stamp on the direction. Interestingly, the outcomes don't necessarily change, evidenced by the fact that our institution's key goals have been stable over time. The question is: How do we build a system that can thrive across changes in leadership?"

Show-me-the-money syndrome. When institutions successfully save millions of dollars through their data-driven decision-making processes, department heads may push back if some of those savings don't drift back to their specific areas of responsibility. The mentality is, "If I save the money, why don't I get the benefit?"

As part of the change management piece, business officers need to press home the point that initiatives are designed to help across the board, not individual silos. The University of Denver has alleviated this syndrome by offering an incentive: The institution allows departments that have exceeded revenue goals or saved a portion of their expense budgets to carry forward a portion of the amount into the next year, Woody reports.

"We are in a resource-constrained environment, and it could get more so," adds Frederick "Rick" Niswander, vice chancellor for administration and finance, East Carolina University, Greenville. "The issue is not whether you will save money so you can hire another faculty member. You're saving money that allows you to not eliminate a current faculty position. Until we get that mind-set as an institution, we're not going to get anywhere."

Data distractions. Business officers who implement the methodology for data-driven decision making may encounter detractors who discount the process, says Natalie Kellner. "Many detractors think information is power—so why share it? But we must provide leaders at all levels the tools with which to make informed decisions, in order to drive the institution's success

One way detractors hinder the process is to find fault with the data. Business officers must recognize that the data can never be exact. "If we spend all of our time trying to get to the perfect number, we miss the forest for the trees," Woody says. "Data-driven decision making is about the direction and order of magnitude, not the exact percent."

When mapping data-driven institutional success, "there is not one road to Damascus," reports Ron Coley, associate vice chancellor, business and administrative services, University of California, Berkeley, "but nobody makes a good decision if they make it alone."

Business officers who have implemented game-changing initiatives identify 10 factors that helped them in their journey:

Developing an academic-business partnership.

Communicating to stakeholders continuously.

Producing transparent financial data for use institutionwide.

Instilling a high-performance culture within the institution.

Investing in outside change management expertise.

Setting up a program office to monitor progress.

Convincing top leaders to support and defend the process.

Tying measures to goals and holding people accountable for them.

Using validated models for regressions and comparisons.

Creating standards of practice.

"There are many building blocks," says Richard Katz, group moderator, "that are essential elements for success. This is a continuous process with no magic bullets-and it will not happen overnight."